Dollar

December 08, 2009

NEW YORK (AP) -- The dollar rose Monday to its highest level since the first week of November as last week's U.S. jobs report fed traders' expectations of higher U.S. interest rates. Higher interest rates can support a currency as investors move funds to where they earn better returns. On Monday, the U.S. dollar index, which measures the dollar against a basket of six other major currencies, rose to its highest point since Nov. 4. The Federal Reserve has kept the key federal funds rate at a range near zero since last December. The central bank has consistently said that because it expects the unemployment rate to remain high and inflation low, "economic conditions were likely to warrant exceptionally low rates for an extended period." On Friday, however, the government said the unemployment rate dropped to 10 percent in November from 10.2 percent in October, raising hopes for a sustained recovery in the labor market. It also increased investors' expectations that the Fed could start hiking rates sooner than expected, perhaps even as early as the first half of next year. That propelled the dollar higher Friday, and its gains continued Monday. In morning trading in New York, the 16-nation euro dropped to $1.4800 from $1.4827 on Friday. Earlier in the session, the euro tipped below $1.48 for the first time since Nov. 20. Meanwhile, the British pound dropped to $1.6347 from $1.6429, while the dollar dipped to 90.00 Japanese yen from 90.70 yen. The dollar rose to 1.0209 Swiss francs from 1.0188 francs, but slipped to 1.0546 Canadian dollars from 1.0589 late Friday.